The Fear Factor

Appropriately enough at the start of the Great Depression in 1929, Walter Cannon came up with the term “Fight or Flight” to describe how animals would react to a stressful situation or perceived threat, such as catching sight of an approaching predator. It described the two most commonly observed behaviors that an animal would undertake when feeling threatened. His phrase became very well known and very commonly accepted. Since then there have been advances in our understanding of the reactions to extreme stress, such as being approached by a predator or perhaps predatory lender. It seems that the term Fight or Flight is actually out of order as it would have been more accurately characterized as “Flight or Fight” and it is missing a step or two in how humans as well as other animals react to threats.

There are at least four separate reactionary stages that occur when animals are threatened. The freeze response comes first which is characterized as a state of hypervigilance. Research has shown that the initial freeze response is “stop, look and listen”, the immediate response associated with a fearful situation. Once this first phase has run its course the next one is an attempt to flee the situation, to remove oneself from the threat. The third phase is then to fight, to resist the threat. Once the fighting is over or is deemed as not immediately advantageous, a type of paralysis sets in called tonic immobility or more commonly, fright. An illustration comes from victims of physical attack, such as rape, where this phase of the reaction can result in extreme passivity, possibly in the hope that the attacker or threat may loosen some vigilance, or relax its guard and allow the victim to escape. Some victims of rape experience guilt at not having fought to the “very end”, however what they may not know is that the fright phase is hardwired into our systems, as well as that of other animals, as a survival mechanism and in order to fight to the “very end” the victims would have to override their natural biological evolution, a difficult task. So the more accurate and updated description of the response pattern seen when a person or other animal is feeling extreme threat is to freeze, flight, fight, and then fright.

Threats of course can be perceived as coming from all sorts of differing sources. There are threats to your physical well-being such as in rape or being mugged for your money. There are also threats to your livelihood, such as being laid-off or dismissed from your job. There are threats to your freedom as you may experience if you are captured after committing a crime, or speaking out, exhorting your point of view in a country that has no free speech. There are larger environmental threats such as global warming, pollution, and the exhaustion of our natural resources. And then there are threats to your long-term financial well-being such as having the value of your retirement savings or investments disappear. There is every expectation to believe and the data suggests that those who feel threatened by the collapse of their 401k or retirement plans, or for instance those who lost their money to swindlers such as Bernard Madoff, will follow the same evolutionarily derived paths of coping with the threats as those who are in situations where their physical well-being is at risk. A threat is a threat is a threat.

In December of 2008, we undertook a study as part of our quarterly measurement of Employee Confidence. As part of that study we wanted to gauge how concerned people in the major economies of the world were about their personal financial well-being, in this time of economic uncertainty and whether those that expressed more concern would behave differently as consumers than those who had less fear. In this portion of the study we asked 11,000 respondents whether they were 1.) Very Greatly, 2.) Greatly, 3.) Neither Concerned or Unconcerned, 4.) Little, or 5.) Very Little, concerned about their personal financial well-being currently. When you examine the percent of people who respond either Very Greatly Concerned or Greatly Concerned, a bit of unease settles in as the numbers are astonishingly high as seen below.

Country

% Very Greatly or Greatly Concerned about Personal Financial Well-Being

France

52%

USA

40%

Spain

33%

Germany

30%

United Kingdom

29%

Canada

27%

India

19%

The relatively positive results in India where about “only” 1 out of 5 express very great or a great deal of concern was explained a few months after we analyzed our data by an article in the New York Times (March 2, 2009). “On Friday, India reported that its economy grew 5.3 percent in the quarter ended in December when compared with the previous year. While that was down from the 7.6 percent growth in the earlier quarter, it was in sharp contrast to the retrenchment in other countries.”What is of most interest to me is that we had our answer regarding what was happening in the Indian economy almost 3 months before the official report on the state of the Indian economy and we got our insight by asking those working within the economy, the people in the trenches.

We then sought to answer a follow on question. Would those who express greater concern about the economy modify their personal spending patterns? In other words to what extent do these fears translate into actual changes in behavior? And so we asked about delays in purchases people were making based upon their level of personal financial concern as well as delays in purchases they anticipated in the next six months.

% Very Greatly or Greatly Concerned about Personal Financial Well-Being, who are Delaying Purchases

% With Little or Very Little Concern about Personal Financial Well-Being, who are Delaying Current Purchases

Currently

86

6

Over the next 6 Months

82

6

In the table above you can see that those with greater amounts of concern are in fact modifying their spending on current purchases and at the moment people looking 6 months out see little difference in terms of delaying their purchases. When consumers are simply stopping their purchases they are in the freeze phase of coping with the threat they perceive to their personal financial well-being. Given the level of concern that people have regarding their personal financial well-being on a global scale and its impact on behaviors such as the delay of purchases, a challenge that arises is how can organizations, whether they be for-profit companies, geographic entities such as a state or country, non-governmental organizations, positively impact people’s perception of the economic/organizational environment and begin to create a self-reinforcing positive feedback cycle that can help to alleviate the downward cycle in which we are enmeshed? How do we re-establish Confidence in our organizations, in our economies, in our own capabilities? Stay Tuned.